A recent collaboration between pricing analytics provider Nomis Solutions and J.D. Power could help auto lenders quickly retool their interest rates and dealer incentives for a competitive edge.
J.D. Power will allow lenders using its PIN Navigator tool to feed retail transaction data into Nomis' Price Optimizer platform, Nomis announced in November. PIN Navigator collects information on what Nomis said was more than 70 variables related to franchise dealership sales within a specific region. Nomis' Price Optimizer helps lenders interpret that data and adjust their underwriting based on market conditions.
"With information as recent as the last 72 hours, lenders can identify emerging trends and make pricing decisions in real time," Nomis wrote in a Nov. 11 news release announcing the J.D. Power deal.
The announcement highlights the potential for rapid refinement of the underwriting policies F&I managers encounter.
Prashant Balepur, Nomis product senior vice president, said it's the first time his company has received auto market intelligence. He called the J.D. Power data "the most 'fresh' information available to lenders today," typically arriving 24-48 hours after the transaction at the dealership.
Balepur told Automotive News that auto lenders have "always been fairly agile" and will look at their pricing daily. But this process is labor-intensive when handled through traditional means, he said.
Nomis' platform and the integration with J.D. Power streamlines and automates this process, according to Balepur. He said the resulting pricing decisions can be fed into a dealership management system.
"Given the volatile sales environment, combined with an expectation of rising interest rates, the ability for banks, captives, credit unions and independents to make accurate and competitive auto financing offers, while simultaneously maintaining profitability, has never been more critical than it is now," Nomis CEO Frank Rohde said in a statement Nov. 11. "Nomis Price Optimizer helps them do just that. Now paired with J.D. Power's extensive auto finance dataset, this strategic collaboration positions our organizations to provide even further transparency into real-time, frontline pricing insights and actionable recommendations for today's highly competitive auto lending market."
Lenders have grown profitability by between 10 and 25 basis points using the Nomis platform, Balepur said. The company estimates that the J.D. Power information should add several basis points more on top of that.
"Having Nomis engage with select J.D. Power clients early on, we have seen first-hand how powerful the Nomis modeling is and how our real-time data can work together to benefit clients," Mike Buckingham, J.D. Power managing director of PIN Auto Finance, said in a statement.
Nomis flags rates overpriced for a market as well as underpriced ones, Balepur said. Addressing these unbalanced pockets leads many of its lender users to an "up and to the right" situation where both profitability and volume increase, according to Balepur.
Nomis helps the lender set its initial pricing pitch to the customer. But lenders also can use the software to optimize the incentives extended to a dealership, such as flats or margin, and J.D. Power's information can help with this, according to Balepur.
Balepur said another application of its technology would be to "cut down on the back and forth" that arises when a dealership and lender haggle over loan terms to make the deal work. For a borrower, it's "the most uncomfortable time," he said. Instead, a bank's counteroffer could be tailored by the software rather than requiring a human underwriter, he said.